News from EPI ›EPI submits comments on DOL’s proposed “tip stealing” rule: Rule would transfer $5.8 billion from workers to employers every year

EPI Policy Director Heidi Shierholz submitted comments to the Labor Department on its proposal to allow employers to pocket the tips of their employees, so long as workers are paid the minimum wage.

Included in Shierholz’s comments was her economic analysis of the proposed rule, which shows that if the rule was implemented, it would result in $5.8 billion in lost wages of tipped workers each year. And, nearly 80 percent―$4.6 billion―would be taken from women who are working in tipped jobs.

But nothing in the rule actually requires employers to distribute the tips they confiscate—employers would have the legal right to pocket them. Shierholz’s analysis shows that the $5.8 billion tipped workers would lose would be a windfall to restaurant owners and other employers of tipped workers, and that “back of the house” or other non-tipped workers are unlikely to see any change in their take-home pay.

“This proposal is something the National Restaurant Association—which represents restaurant owners, not workers—has wanted for a very long time,” said Shierholz. “So it’s not a surprise that the rule would result in pay increases for the owners and pay cuts for the workers.”

Importantly, DOL was required as part of the rulemaking process to quantify, to the extent possible, the economic impact of rule—but DOL claimed that it was unable to do so. It came out last week that DOL did do the required analysis, but then buried it because it showed that the rule, if finalized, would legalize the transfer of billions of dollars in tips from servers to employers every year. Shierholz, who served as DOL Chief Economist from 2014 to 2017 writes that it is “complete malpractice” to propose a rule without releasing the quantitative analysis that would provide the public the information necessary to understand the impact of the rule.

In addition to EPI’s formal comments, hundreds of thousands of Americans commented directly in opposition to the rule. The comment period is scheduled to close at midnight on February 5, 2018.

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EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. EPI’s research helps policymakers, opinion leaders, advocates, journalists, and the public understand the bread-and-butter issues affecting ordinary Americans.